Credit union’s attack on Mulvaney appointment rejected

A New York City federal credit union does not have standing to attempt to block Mick Mulvaney’s appointment as Acting Director of the Consumer Financial Protection Bureau, a U.S. district judge has determined. Lower East Side People’s Federal Credit Union advanced four separate arguments to show that it had suffered an injury in fact from the appointment, but the judge rejected all four and dismissed the suit (Lower East Side People’s Federal Credit Union v. Trump, Feb. 1, 2018, Gardephe, P.).

Lower East Side contended that President Donald Trump exceeded his authority when he relied on the Federal Vacancies Reform Act in appointing Mulvaney as acting director. The Dodd-Frank Act makes clear that the CFPB’s deputy director automatically becomes acting director when there is a vacancy in the director’s office, the credit union asserted, which meant that Leandra English, not Mulvaney, was the Bureau’s acting director (see Banking and Finance Law Daily, Dec. 7, 2017).

Standing to sue. A federal court has jurisdiction over a suit only if the plaintiff can describe an injury in fact that resulted from the challenged action, the judge pointed out. Lower East Side had to be able to describe a concrete and particularized, actual or imminent, invasion of an interest protected by law that resulted from Mulvaney’s appointment. Otherwise, the credit union did not have standing to sue, and the federal court did not have jurisdiction.

The credit union claimed it had standing for four reasons:

It was regulated by the CFPB.

CFPB actions under Mulvaney had hindered the credit union’s ability to carry out its mission of improving the financial health of underserved communities.

It would suffer economic harm due to the Bureau’s changes in Home Mortgage Disclosure Act regulation enforcement.

It was experiencing uncertainty due to the Bureau’s announced plan to review and amend the HMDA regulation.

The judge considered, and then rejected, each claim.

Regulated institution. The credit union did not have standing simply because it was regulated by the CFPB, the judge said. Unless the Bureau, under Mulvaney, had taken some action that imposed a new obligation and new costs on Lower East Side, the credit union could not show that it had suffered an injury in fact.

Harm to mission. Standing to sue cannot be based on harm to an institution’s organizational goal unless the harm extends to an injury to the organization itself, the judge said. Lower East Side could not show standing based solely on a reduced ability to improve the financial health of the communities it serves; rather, it had to show harm to itself. A claimed interference with the credit union’s ability to achieve its goal would not confer standing to sue.

Changes in HMDA compliance policies. According to the judge, Lower East Side asserted that recent CFPB pronouncements about how the HMDA regulation would be enforced would "effectively gut the HMDA rules." The first problem with that claim was that standing generally is based on the situation at the time a case is filed, and the CFPB announcements about its HMDA plans came after the credit union filed its suit.

Even if post-complaint events were to be considered, the credit union had not described an injury in fact, the judge continued. The enforcement change announced by the CFPB was that banks that made HMDA reporting errors with their 2018 data ordinarily will not be penalized. The credit union believes this will lead banks to falsify HMDA data in order to improve their Community Reinvestment Act ratings. According the Lower East Side, this will harm it because the banks will be able to stop investing in community financial institutions to earn CRA credit.

"Plaintiff’s speculation regarding the future actions of third parties is not sufficient to establish an imminent injury," the judge said. Moreover, any injury would not have been "fairly traceable" to the CFPB’s actions.

Planned HMDA rulemaking. Last, the judge determined that the Bureau’s plan to open a rulemaking to reconsider the 2015 amendments to the HMDA regulation could not affect the standing determination because this announcement, too, had come after the credit union filed its suit.

Moreover, a claim that a reexamination of a regulation would cause injury was conjectural and hypothetical, the judge added. Contrary to the credit union’s allegation, the CFPB had not said that it was going to rewrite the rules, the judge pointed out. Rather, the Bureau had said that it may make changes. Such an indefinite statement could not induce the credit union to invest resources in compliance, meaning there was no concrete injury.